Present Value of Annuity Calculator

P = A x ((1 - (1 / (1 + r) ^ n)) / r)

Where;

• P = the present value of an annuity stream
• A = the dollar amount of each annuity pay
• r = the interest rate (or the discount rate)
• n = the number of periods (time when payments will be made)

Suppose a person has an opportunity to receive an annuity that pays $50,000 per year. For the next 25 years, with an interest rate of 6% or a lump sum payment of $650,000. Therefore, using the above formula:-

Present value of annuity;

• = $50,000 x ((1 - (1 / (1 + 0.06) ^ 25)) / 0.06)
• = $639,168